July 8 (Bloomberg) -- Verve Energy, a power producer owned by the Western Australian state government, restarted generation at a unit at the Kwinana plant after maintenance, helping to ease an energy shortage created by a gas pipeline blast.

The 110-megawatt coal-fired No. 6 unit at the site resumed operating on July 6 after a shutdown that lasted almost three months, Peter Winner, a spokesman at Perth-based Verve, said today by telephone. The restart is beginning to ease the effect of the gas shortfall, Western Australia's Office of Energy said.

The state that generates than a third of Australia's exports has been gripped by an energy shortage since a June 3 explosion at a pipeline at Apache Corp.'s Varanus Island gas plant off the northwest coast. The shutdown cut almost a third of Western Australia's natural gas supplies, leaving mining companies and small businesses to seek alternative fuel supplies such as diesel.

``The return to service of electricity generation plant is expected to ease the present situation, as has the use of diesel fuel where this option is viable,'' the Office of Energy said today in a presentation on its Web site.

Apache said June 23 it expects to resume 57 percent of supplies from Varanus Island by mid-August, with full capacity to be returned in December.

Given the availability of alternative supplies, there should be sufficient energy to meet all industrial and commercial needs once supplies from Varanus are partially resumed, the Office of Energy said. Some production losses may remain until supplies resume fully because other fuels are likely to cost ``significantly'' more, it said.

North West Shelf

The shutdown of the Varanus plant removes about 350 terajoules a day of supplies from the state's 1,000 terajoules-a- day market. Since the end of June, production from the Woodside Petroleum Ltd.-operated North West Shelf venture has increased, contributing about 150 terajoules a day of additional gas, the Office of Energy said.

Verve has been returning power plants to service to alleviate the energy shortage.

``We've always been able to meet demand but now we're in a better position to manage our fuel stocks,'' spokesman Winner said. ``We're not out of the woods yet by any means. We won't be feeling a little bit comfortable until we get the Collie power station operating. It's still quite tight.''

The 330-megawatt coal-fired Collie power plant, which had an unplanned shutdown at the end of May because of damaged turbine blades, may be operating again by the end of the month, he said.

Gas Exchange

The 240-megawatt Cockburn gas-fired generator has been fully operational since early last week. The Muja 7 coal-fired unit, which is being recommissioned ``slowly,'' is running at about half capacity and is set to reach full capacity in about two weeks, Winner said.

The company is assessing work required to restart the Muja AB plant, while the gas turbine at Pinjar is 3-4 weeks away from restarting, he said. The No. 7 unit at Kwinana is due to be idled for maintenance within weeks, he said.

The Kwinana No. 6 unit will run at 60 percent of capacity for the first two days before returning to full operation, Western Australian Premier Alan Carpenter said in a statement on the government's Web site.

``Bringing this coal-fired power station back on line will reduce the amount of expensive diesel used and free up gas for companies that need it,'' Carpenter said.

Gas Bulletin Board

To further ease the supply shortfall, the Office of Energy is working with the gas market operator to allow smaller energy users to access a recently opened gas exchange, state Energy Minister Francis Logan said.

The so-called Gas Bulletin Board, announced July 2, allows users and producers to make trades through an e-mail-based system, with the highest bidders matched to the lowest selling price. The minimum trade will be reduced to 0.1 terajoule a day, from 0.5 terajoule, Logan said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

Last Updated: July 8, 2008 03:40 EDT